January 2011 - March 2012

March Market Update

Despite the swing down in January's prices, it appears that home prices have rebounded to just under $150,000 for the median price of a resale home in Reno/Sparks.  As the market enters it's highest demand spring selling season, tight inventory is encouraging multiple offers and bidding up the asking and settled price of many homes. 

This mini-bubble has been caused by the passage of AB 284, which essentially stopped foreclosures statewide October 1st, 2011.  The bill was written as a reaction to the so called "robo-signing" and MERS debacles, and establishes much stricter requirements for lenders to proceed with the foreclosure action.

According to the state attorney general Catherine Cortez Masto; negotiations are ongoing with major lenders to work out an agreement to allow foreclosures to proceed in Nevada that protects the rights of homeowners.  The egregious practices and outright lies that banks have perpetuated on the home owning public and during state sanctioned foreclosure mediation has made Ms. Masto wary of any agreement with these financial institutions which does not carry independent oversight and  penalties. 

Until the next wave of foreclosed homes hits the market, it is likely that prices will continue to strengthen as long as mortgage rates stay historically low.  However, there is a tidal wave building of homeowners who have defaulted on their payments but are still sitting in their homes.  Once the banks start foreclosing again, expect a tsunami of inventory to flood the market.

Interest rates remain at historic lows, making homes affordable to many who were completely priced out of the market just a few years ago.  First time buyers and investors are flocking to the area, snapping up well priced homes.  But all is not rosy.  The Nevada Department of Employment, Training and Rehabilitation released it's latest figures of 13% unemployment for Reno/Sparks in March.  News of continuing contractions and layoffs amongst city government  has not been offset by private business hiring's or relocating companies. Nearly every retail and commercial site has substantial vacancies throughout the area.

Inflation is also a silent factor in affordability, especially in hard hit Nevada economy.  According to Robert Barone, of Universal Value Advisors in Reno,  while it is clear parts of the current economy are still "deflating" (like real estate), the cost to stay alive (food, fuel and other consumables) continues to rise. If the Bureau of Economic Analysis used the same formula today to calculate inflation that it used in 1990, the annual rate of inflation in March is about 6 percent, according to John Williams of Shadowstats.com."

Almost all homeowners who stop paying on their mortgage end up with the home going back to the bank, as the owners take no action or are denied a remedy by the bank.  What can a homeowner do when they find themselves unable to make their payments? Foreclosure alternatives are discussed in depth on our website Avoid Foreclosure in Nevada

Bank owned (REO) properties and "short sales" overwhelmingly make up our local market.  Available inventory as of this writing, there were 2654 homes for sale listed on multiple listing service, and 67% of them were bank owned or short sales.  67% of all homes sold in February & March were either bank owned or short sales.  The inventory of REO (bank owned) single family homes is 829 as of this writing. 

REO condo inventory is now 770 units of various types.  REO properties are typically sold for about a 20% discount against "normal' sales, which depresses the market for all other homes, and they also "remove" the opportunity for the seller to "move up" in the market, as there is no family selling one house to buy another, thus depressing the housing market at all price levels.

The brightest sector of the real estate market is rentals. With so many homes being foreclosed on in the area, many renters as well as homeowners are losing their homes, contributing to the rental market for moderately priced homes.  Many homeowners are turning into semi-investors: renting their homes instead of selling in order to wait this downturn out.  Many investors are out taking advantage of this excellent opportunity to pick up a rental as the returns are around 10% gross.

464 resale homes were sold in February; 527 in March. The median sales price adjusted to $149,900. The average sales price of a resale home rose to $186,431.  The spread between initial asking price and sales price was about 10% above the final sales price, but when price reductions were factored in, that spread narrowed to about 3%.

The upper end of the market remains tepid with only seven homes sold for over $900,000.  Even luxury homes trend with distressed sales in this market, as one of the seven sales was a bank owned foreclosure.

Condo resale's were stable with 136 sold in February and March.  79% of these units were either bank owned or short sales. From the assessor's recordings, it appears that 12 new condos at the Montage were sold during February & March. (It's difficult to obtain an accurate timely accounting as recordings trickle in).

New home sales were tepid in February with approximately 9 new homes sold and March was little improved with only 11 new homes sold. The median sales price in January was $255,000 as builders concentrate on higher priced homes to compete with foreclosures for buyers.  (It's difficult to obtain an accurate timely accounting as recordings trickle in).

Sellers are aggressively pricing their homes with increasing time on market. The final selling price on homes was super competitive 3% of the asking price.  Days on multiple listing for sold homes in November was 145 days, but this number is somewhat misleading- if the total days on market (sometimes with multiple listing agents) is taken into account, the truer number is 181 days on average before a property is sold.

Madeline Zook

Broker-Owner